Tips on home-buying in a sellers market?

April 1, 2013 1:47 PM

We're house hunting and have had no luck with our offers. What can we do to maximize our chances of a seller accepting our offer?

Back story: We live in a part of Seattle where the supply of houses in our price range is extremely limited. We want to stay in this general vicinity (10 mile radius) for commute and school district reasons. There are houses that come up for sale in our price range, but literally go pending the same day they are listed! We have made 2 offers that were not considered because in the first case someone outbid us by $100,000 over asking price, and the second case, we almost got it, but the winner put down 50% cash! Ack! We have the following so far:

1. We have a realtor working with us. She's pretty good and comes with great references
2. Have been preapproved for up to $100k above the price range we're looking at (can comfortably afford).
3. Do all inspections prior to making the offer (so the offer isn't contingent on inspection). That has been $1000 down the toilet since we didn't get the houses we inspected!
4. Have up to 20% downpayment available
5. Go view a house the minute it comes on the market.
6. Very flexible about the features (but need a minimum of 4 bedrooms and at least 2 baths)

Things that go against us:
1. We live in an area where buyers HAVE serious purchasing power (think employees of big name tech companies with $$$ more at hand)
2. See 1 above!

What else are we not considering? What else can we do to convince a seller that we really are good homeowners and we would really REALLY like to live in their house because *gasp* of the children?
* We own a 3 bedroom condo with no yard and we now have 3 kids (one of which is special needs and receives excellent Spec Ed in the current school district which we would like to maintain)

Thanks

posted by ramix to Home & Garden (31 answers total)

What else can we do to convince a seller that we really are good homeowners

Pony up more cash (either down payment or by increasing offer price) or less contingencies or both. If you can't do that, you can't afford a house in Seattle. Don't worry, I can't either.

we would really REALLY like to live in their house because *gasp* of the children?

This is irrelevant to the seller and should not be a factor in the deal.
posted by saeculorum at 1:50 PM on April 1, 2013

How quickly can you close?
We were just in a very similar situation and we believe we edged out other bidders on a particular house because we were able to close ASAP.
Any little thing could make the difference. It isn't necessarily the *highest* offer they accept, but the most likely to go all the way through smoothly.
posted by jozxyqk at 1:52 PM on April 1, 2013 [1 favorite]

Can you avoid the bidding war? If you could find the house you wanted outside the normal real estate channels it might be easier. In my DC neighborhood, I have received mail from realtors who were looking for houses that were yet to come on the market. You might send postcards yourself, or try posting notices around the neighborhood, or even placing Google adwords made specific to your location. Make the case that the sellers don't have to pay the full realtor commission and therefore net more on the sale. Good luck!
posted by procrastination at 1:53 PM on April 1, 2013

I don't think anyone gives much of a fuck about anything other than 1. how much money they can walk away from the closing with and 2. making sure you'll be able to actually show up and deliver that money.

So basically, as much of a bummer as it is, just offer more for cheaper houses.
posted by teishu at 1:53 PM on April 1, 2013 [5 favorites]

Oh and point 2.5 is that they want it done quick and easy.
posted by teishu at 1:54 PM on April 1, 2013

Stop getting houses inspected before making your offer. At least you won't be flushing $$$ down the toilet.

In real estate it's all about money, so whoever is paying more at the end of the day, that's who's getting the house.

All cash is nice, but at the end of the day, as a seller, it doesn't really matter to me because at closing I get my check no matter if the buyer is paying cash or financing.

Fast closing dates, or flexible closing dates can be good.

Here's the problem though, unless you outbid someone, you're not getting the house. Very few people are going to let sentimentality about your kids win out over money in their bank account.

Keep at it though, at some point it will click.
posted by Ruthless Bunny at 2:01 PM on April 1, 2013 [3 favorites]

Consider a smaller house (can the kids double up?) and gleefully outbid some other suckers!
posted by chesty_a_arthur at 2:02 PM on April 1, 2013

Are you hoping to do a contingency sale? Because that would drive me, if I were a potential seller, away.
posted by The corpse in the library at 2:05 PM on April 1, 2013

I'm in Seattle too, looking to buy (another) house. We're looking for anything that's a good deal, small enough for 2 people, and not a complete fixer. So we're not competing for the houses that you want.

I've heard that some sellers actually will pay attention to a personalized letter of why your family would really enjoy the home. For example, my house (currently rented out) is in Ballard. The developers want the most money possible (factoring in financing not going through risks), of course. But a lot of the long time residents prefer owner-occupiers who will actually enjoy the house and love it and take good care of it.

Where exactly are you looking? Anything under $300k sells like crazy. (And so does anything between $1M and $1.4M, apparently. But that's not within my buying power anyway.) But there are quite a few houses that might work (check out houses that have dens or non-conforming bedrooms, and consider if you need two full baths or just two toilets) between the $300k to $600k range depending on which neighborhoods you are looking at. There are even houses that have been on the market for--gasp!--over two weeks.

Lastly, what about renting or continuing to squeeze for a bit more? I know that moving twice/being squished can be stressful, more so if you have a special needs child. But the real estate market is seriously wonky right now, and I think you need to buy a house that makes sense emotionally as well as financially. Otherwise, those $1000 in inspection fees will seem trivial if you buy a house that you can't afford and/or can't sell when you need to.
posted by ethidda at 2:07 PM on April 1, 2013

Here in Austin (where the problem of houses going pending the same day they are listed is the same) one of the best things everyone I know has done was to drive around each neighborhood and look for a sign that says "Coming Soon". Call the realtor and get a viewing immediately, if you like the house make an offer THAT DAY. Repeat every day or two as needed.

That way when they list it and it goes pending, it is pending because of you.
posted by magnetsphere at 2:16 PM on April 1, 2013 [1 favorite]

All I can really say is that you should keep at it.

Be flexible on closing. Make offers as soon as possible. Don't go into panic mode here, but it's pretty clear that you are not in a situation where you can mull over the decision. Like it? Make an offer. Now.

I think that doing inspections ahead of time is a waste of time. Sales are contingent on inspections. People know that. If someone is stupid enough to buy a house without doing an inspection, well, you can't fight stupid.

Another option is to stop looking at houses that have just gone on the market. Look, instead, at houses that have been on the market for a while. You might be dealing with someone completely unreasonable, but you always run that risk. The good news is that you likely won't get into a bidding war.
posted by It's Never Lurgi at 2:24 PM on April 1, 2013

You don't have to look like 'good homeowners' -- it's nothing at all like renting in that regard. The sellers don't care about your kids.

I don't understand #3; I've never heard of that before. What sense would it make to pay for an inspection when you don't even know if you'll be able to buy the house?
posted by kmennie at 2:26 PM on April 1, 2013 [1 favorite]

If you could find the house you wanted outside the normal real estate channels it might be easier.

This is a good idea, and your realtor should be doing it for you. Ask her what she can do about finding houses before they hit the market. Ask her what professional networks she has access to that might present this kind of option. If she doesn't have anything like that, consider going with someone else. Real estate is definitely a word-of-mouth business and this is going to keep happening if you just try to get to the listed places first, rather than getting there before they list.
posted by Joey Buttafoucault at 2:29 PM on April 1, 2013

Boston also has a crazy housing market now, and we're seeing some of the same stuff.

Some good friends of ours recently had an offer accepted, and they think they got it, in part, because they described to the sellers how they are local and would be very flexible on closing (i.e., were prepared to close early, but were willing to close in five months, if the sellers wanted). This was for a $900K house that was on the market less than a week. So, while this is not the kind of market where I think people really care about how you're going to lovingly care for their former home (some might care, but gimme them dollars!), there's some soft messaging that can help you.
posted by Admiral Haddock at 2:45 PM on April 1, 2013 [1 favorite]

I can recommend Redfin if you're considering a new real estate agent. I've bought two houses through them (including a short sale), and sold one.
posted by The corpse in the library at 3:02 PM on April 1, 2013

"[We] Have up to 20% downpayment available ..."

20% is considered rock-bottom minimum. A fatter down would be better.

Are you also looking at short sales?

Also, consider a three-bedroom house. You might find your options opened up considerably.
posted by BostonTerrier at 3:14 PM on April 1, 2013 [1 favorite]

It is all about the money. Ignore the asking price....especially if it is low compared to very recent comps.

Directions: Find the house you like, offer the maximum you are able and willing to spend on it.

This is the market right now when you are fighting cash in hand buyers.
posted by couchdive at 3:16 PM on April 1, 2013

All cash is gold to me as a seller - no financing contingency and no BS with the buyer's bank. You will likely never beat an all cash offer. A financed offer might tank at the bank or the bank might demand specific repairs. We just sold over asking price. The key determinant between the final bidders was one agreed to go all cash. And that lady is now living in my old house.

We had a bunch of offers. In the end, we didn't seriously look at anyone who offered less than asking price or less than 50% down. We read through the other offers and we really liked some of those potential buyers - young families, first-time buyers - but in the end we didn't seriously consider those offers when there were others that were much more stable financially.

Inspections before the offer? That is madness. Houses in my neighborhood are selling in under a week and I've not heard that people are doing inspections first. (Also, what a headache for the sellers since anything found on that inspection becomes something they need to disclose.) If you wanted to do an inspection before the offer, I'd just say no thanks.
posted by 26.2 at 3:34 PM on April 1, 2013 [1 favorite]

In some super tight markets, a buyer's inspection before the offer makes your offer much more solid and attractive to the seller, since the seller knows the buyer has done their homework and is less likely to back out. If your agent has solid experience in the market and recommends this, I'd trust their guidance and keep doing that if it seems worthwhile.

You don't sound fully convinced that your agent is top notch. You might try asking the agent why what you're doing so far hasn't been effective. Or, how many successful buys has the agent had in your neighborhoods and price range in the past 2 years? If it's not an impressive number, try going to the most well-known agency in your area, finding the rock star agent on their team, and seeing what he/she has to say, and whether they will work with you.
posted by quinoa at 4:01 PM on April 1, 2013

A friend of mine who sold in a similar market said that one of the offeres she received had zero contingencies, offered list price, and then further stated that this buyer would pay $2500 more than the highest offer she received. My friend had to provide proof of the highest offer and then this crazy buyer got her condo.

Maybe see if there is a similar strategy you can use but with an upper limit?
posted by skrozidile at 4:03 PM on April 1, 2013

There is; it's called an escalation or escalator clause (I've seen both terms used). One of the bidders when I sold my house had one.
posted by The corpse in the library at 4:22 PM on April 1, 2013

Pay more. Keep swinging. Be open to houses that need work - houses that are "move-in ready" generally go for a bigger premium. Paying list for a fundamentally good house with a shit kitchen may get you a house with less competition as long as you factor in the cost of a complete kitchen renovation.

But very few people have their first offer accepted. Just keep at it. It's an emotional rollercoaster.
posted by GuyZero at 4:30 PM on April 1, 2013

I'd really avoid the "zero contingencies" approach mentioned by skrozidile. You really don't want to end up with thousands of dollars of termite damage or a busted sewer lateral or something like that.

I made a bunch of offers on other places before I got one accepted. The one that was accepted was an offer at the asking price, with pre-approval, very flexible closing options, and a 24 hour (36 hour?) sunset. Take it or leave it. Now. Not wanting to look a gift horse in the mouth, they took. It was a long, slow process for me, but it eventually bore fruit.
posted by It's Never Lurgi at 5:14 PM on April 1, 2013

We bought our house in a sellers' market where people were making offers on the spot at the first open home (and some scheduled open homes wouldn't even occur because the house got snapped up somehow beforehand).

There were a few things that worked in our favour:

- flexible/fast closing, not dependent on selling our own place. Can you rent out your old place for a while so you don't have to have a chain?

- we don't have kids so we were willing to consider places in bad school areas, or with limited play space/no garden. Obviously that isn't the case for you, but if you can think of some feature that is usually desirable in a house that you don't need, and target houses that are lacking that feature, you'll be competing with fewer people. (But of course that will make the house harder to sell in the future).

- we are google-fu masters. As well as the usual "for sale" sites, we ferreted out weird listings in other places, and also rang real estate agents for places that weren't yet listed, and made notes of any "for sale" signs we passed that hadn't been listed online (yet). We also found quite a few places listed on the major sites that were listed wrong, e.g. in the wrong category (apartment when they were stand-alone houses) or the wrong price range. Those are GEMS because many people will not even see them when they search.

The place we bought in the end was interesting. It was structurally perfect (here the seller legally has to provide an inspection report, from an independent certified inspector, and the buyer pays those costs at closing, which I think is an awesome system). But it was painted a hideous colour, badly (large drips, things caught in the paint), was really dirty, and had dead insects on every surface. (I think the seller had set off a bug bomb prior to the showing, and hadn't realised this would result). These were such easy fixes, but really hard to see past. Even my husband didn't really believe me when I claimed the house would polish up to be just as nice as any other we had been looking at (and failing at bidding for). But it did! It's awesome! And we got it for 3/4 of the price that an almost identical house (but clean and nicely painted) went for at auction the same morning we put our bid in.

Try looking for places with bad photos. Deliberately go view houses that look terrible in the listing (and I mean look terrible, not sound terrible. There's a difference. Find places that have the features you want but are just really badly listed. Dark photos of messy rooms. Illiterate sounding write-ups.) A lot of people won't see past that. Sure, some of them really will be dumps. But there's a chance you'll find one that isn't.
posted by lollusc at 6:50 PM on April 1, 2013 [2 favorites]

Oh, one other thing. If auctions are common in your area, you can use that to your advantage. Identify houses that will "compete" with each other. I.e. houses that are similar in features and location, and that are likely to attract the same buyers. You want to find at least two, with similar predicted price-ranges, where the slightly nicer one is being sold at auction on a specific date, and the slightly less nice one is not an auction. Ideal is three or so, with most of them selling at auction at least two weeks from now and just one that isn't. Most people who are interested in these houses will have the full set on their shortlist, and will be bidding at auction, planning to keep the non-auction house as a "back up" to bid on if/when they lose the auction.

So all you need to do is accept that you will not get the auction house(s). Forget about that. Put in a bid on the slightly less nice house immediately, with an expiry date before the auction.

We are pretty sure this also helped us when we bought. There were three other houses that were very similar and within a few streets of ours coming up for auction within the next month. One went that morning, and we realised that all the other bidders at that auction probably had the same shortlist in their heads as we did (that morning's house, then the one in two week's time, then the one the following week, and if that failed and this non-auction place was still on the market, then maybe consider that instead). Once we realised that, we knew we would have to act before those other auctions if we wanted to minimise the pool of competitors. The real estate agent selling the place probably also knew this, because he pushed us really hard to extend the deadline on our bid until after the other two auctions. But we held firm, and got it.
posted by lollusc at 7:03 PM on April 1, 2013 [1 favorite]

Best answer: Oh, man. I feel you, because I am right there in that boat with you - same area and possibly the same size/price range. We've been actively shopping for a house for over a year now. Last summer was pretty good for sellers of single family homes in Seattle, but things have changed in the past 6 months: the potential buyers are getting DESPERATE and it escalates the bidding wars. It's very frustrating as a participant. There are just so few houses coming on the market. I am sure that you are not overlooking houses with poor photos or some slightly less desirable traits. It's just that tight in Seattle for single family homes. It sucks.

You can't blame the sellers for being rational actors and choosing a buyer that offers them the most money with the most favorable terms: all cash with a very quick and simple close. If you don't have several hundred grand sitting in the bank there's not much you can do to change that. That said, I know a family that just bought their first home. Pre-inspection, bidding war, escalation clauses, blah blah ... they won but it turned out they weren't even the highest offer (maybe off by $5k?) but obviously there was something more attractive about their offer. They included one of those cheesy letters about themselves so perhaps that helped. So it happens. You just have to be willing to take the risk on paying for the pre-inspections.

I think the best thing you can do is to educate yourself as much as you can about the local market. For example - that house in which you were outbid by $100k - that seems to me that you (and especially your agent) could have anticipated that the house had been priced to trigger a bidding war. I do not use Redfin as my agent, but I use the tools on their website to track houses, even ones I am not interested in buying for whatever reason, especially the list price and sale price. It's given me an idea of how far over the asking price houses will sell for. In certain ranges it seems that there's an upper limit to what potential buyers will add. So if the kinds of houses you are interested in are selling for List Price + $25k, maybe you can start your offers at List Price +$26k with an escalation clause. I really think the key is pricing - be prepared to anticipate the range of offers and make yours the highest. How good is your agent on this point? Do you think she is smart about the money angle?

Also, sometimes selling agents are a little stupid about the money. There was a house that we were very, very interested in and ready to make a speedy decision on. I had a price in mind that I wouldn't go above. The pre-inspections were lining up and our agent called the listing agent to get a feel for where the prices were going. That agent was terribly coy. She expressed all this surprise that there was such interest in the house, but wouldn't give a hint as to the range of offers. So we opted to not make an offer and not do a pre-inspection. Then the house sold for less than what I would have offered! (It was a very nice house with a lot of potential. That's when it really hit me that unless a house is grossly mispriced, buyers basically stick within their range and won't add that much beyond the asking price, maybe 10% more.)

We've decided to bow out of the market for the time being and found an ok rental in a desirable neighborhood. We have the money to buy and it pains me to not invest it, only earning paltry interest in the bank. But my husband is not a bidding war kind of guy, and we're slow shoppers in general. So at least you don't have to compete with us anymore! But, really, my thinking here is that inventory will eventually increase and buyers will have more choice. There are people a little underwater on their homes in Seattle who don't have to sell now, but eventually will want to. And the not-underwater sellers will realize that it's actually a pretty decent market to sell in. (Spread the word!)
posted by stowaway at 8:52 PM on April 1, 2013 [1 favorite]

As a buyer I don't see value of buyers agents. I've bought 3 houses and every time we stated very clearly to the sellers' agent that we weren't represented (and thus they'd get double commission). This helps to ensure that your offer will be viewed seriously.

Also look at any houses that might have been on market for long time. Gross mis-pricings, short sales, etc. can all the sudden move fast once all the parties just want to be done.
posted by zeikka at 10:28 PM on April 1, 2013 [1 favorite]

Do you currently own? If so then you can ask the realtor to do a discount commission if he/she gets both listings. Here's how it works. The realtor of the house you want to buy takes your listing. Then goes to the seller of the other house and says"along with this offer from Ramix I will rebate you X% or X$" That in effect ups your offer while enticing the seller with OMG A DISCOUNT!
posted by Gungho at 7:26 AM on April 2, 2013

Inspections before the offer? That is madness.

It makes your bid more competitive because you can remove the inspection contingency. People are doing that here in the Bay Area as well.
posted by oneirodynia at 1:58 PM on April 2, 2013

We just bought our first house back in February. We're in San Francisco and the market here is similar (pending within days of list, selling for way over asking, crazy open houses with dozens of people, etc). We had amazing realtors who knew the market well, and that was key. We did a pre-bid inspection, so that we could wave that contingency, and had solid financing that allowed us to close in 20 days (only 20% down, btw). Our house received over ten offers, all of which were way (130k+) over asking. We *barely* outbid (less than 5k) three of the offers, one of which was all cash. We also included one of those hokey "omg we love your house!!" letters, and even included a photo of ourselves. Not sure if that helped at all, but the sellers left us a lovely "welcome to your new home" card in the house that made us think it did help and made the whole thing seem less faceless and like the rich, all-cash people win all the time.

Anyway, all of this is to say that amazing realtors are so, so important. We had no idea what we were doing (it was our first house, AND the first house we put an offer on!). They knew exactly what it would take to get it and structured our offer to be the best it could absolutely be.
posted by bienbiensuper at 11:50 PM on April 2, 2013

My wife and I are also trying to buy a house in Seattle. It's pretty tight right now - there just aren't many houses for sale, so the ones which do come up go quickly. Our search radius is even tighter than yours (~1 mile) so our choices are even more limited - but on the other hand we are happy with the idea of a fixer-upper, so maybe that evens things out.

There have been five houses so far that we have been interested in.
1) Major fixer listed at $275K, sold for $400K due to huge lot before we got our offer in. This is what clued us in to the fact that the Seattle real estate market is hot again.
2) Minor fixer listed at $350, toured the day after it listed, made an offer the day after that for asking price with a $5k escalator. Someone else "outbid" us at the same price by waiving the inspection contingency.
3) Major fixer listed at $350k, on the market for a long time. We checked it out, liked it, offered $315K, they accepted. On inspection, discovered that it had serious foundation, plumbing, and electrical problems in addition to the serious roof and interior work we already knew about. The bank would have required more work up front than we could afford to do, and the seller was not in a position to finance any of the repairs, so we backed out.
4) Fresh remodel listed at $399k. Toured it the day after it listed, they were clearly expecting multiple offers, our agent confirmed it had already been bid up to $450k and more offers were expected. We decided to let them have it.
5) Fresh remodel was listed at $475k, on the market for a couple of months and recently dropped to $435k. We offered $430, someone else offered $436 the same day, we matched it, they accepted our offer.

We are not doing anything crazy like putting 50% down, just financing it normally with 10% down. Nor are we doing anything special to try to make the sellers like us. We're just doing what you've been doing, touring houses as they come up and making offers on the ones we like. We have learned that we have to be right quick about it when listings come along, and we have gotten enough of an idea about what houses are going for that we can tell when a house is listed for a real price and when it's just a teaser to get people to bid the price up. I don't have any advice beyond that but I also don't think it's quite as dire as some of the people in this thread seem to believe. Then again I don't know what your price range is. For what my wife and I want, there are literally dozens of possibilities if we were willing to look in a neighborhood a mile or two further out. Columbia City looks particularly promising right now.
posted by Mars Saxman at 12:46 PM on April 6, 2013 [1 favorite]